Feeling Spendy? Here's Why

8 Things No One Tells You About Investing

1.

Just start already!

Take a chance and get started as soon as you can. You don't need to wait until every other financial aspect of your life is solved. Start with as little as $100 now and commit to add $100 every month. Or start with a practice portfolio with no real money invested. Just start.

2.

Keep your eyes open

There's a lot of information on financial markets. Most of it sounds like a foreign language. You don't have to read the Wall Street Journal or watch CNBC to be successful. Be curious about what companies are selling and what people are buying.

3.

The power of compounding

If there is one math concept to get your head around, it's the effect of compounding. Both on money that you're investing and on money that you're borrowing. You pay (or earn) money based on the principal amount invested or borrowed plus the interest added. It's why a mortgage costs you much more than what you originally borrowed and why the earlier you start investing — the better.

4.

There is plenty for everyone

You work hard for your money and over your lifetime you're going to spend a lot. Change your mind from 'I have no money and am scared of how it all works' to 'there are plenty of people in this world making money from my hard work — I should too'. You have an abundance of information and experience with companies, either as a customer or through your observations at work and home. Use it.

5.

Wait, what if I'm in debt?

If you are paying down your debts and not spending more than you earn, set aside some money that you otherwise would have spent on 'low-return' activities: the extra drink at the bar, your afternoon Starbucks, the full-priced, must-have shirt. If you are spending more than you earn, use budgeting tools to organize yourself.

6.

Think outside the bank

Putting money in the bank and watching it may be the safest way, but it will not grow your money. Think of GoldBean® as a way of building your confidence, experience and hopefully bank balance. It's an addition, not a substitution, for saving.

7.

If you're not at the table, you're on the menu

For better or worse, the current financial system is the one we have. Be a participant, not just a contributor to the economy. Remember, 71% of the economy is the money we all spend to live — food, transportation, health and housing. And of that 71%, 75% of it is from women. The economy runs on everyday spending. And the people who understand investing get the benefits.

8.

Too bad working hard isn't enough

The economy is made up of people doing the right thing. Working hard, leaning in and moving up brings success in the career realm, but can cost you financially. Also, the more you earn, the more you spend. Real wealth over time comes through equity. Equity can be shares in the company you work for, equity in your home or equity from the stock market.

There’s no such thing as stupid questions

Stocks represent shares of a company. Buying shares in a company makes you a part owner of that company. As a part owner or shareholder, you benefit when that company makes money. Ways a company makes money or earnings might be by releasing a new product or by increasing its sales. The more earnings the company makes, the more the shareholder (you) benefit.

There are dozens of different ways to invest your money, ranging from the simple to the highly complex, from low risk to high risk. They include stocks, mutual funds, index funds, bonds and more. See GoldBean®’s shame-free Glossary for a further list of investment products and what they mean.

You have two options when it comes to your money: take control of it or rely on others. Choosing the latter, means paying fees for things that you could have managed on your own. These fees may initially look small, but they add up. You can do it yourself with less fees.

There is no maximum and you can start with as little as $100 for your first trade once you subscribe to GoldBean® for $50 a year. If you're not ready to enter the market with real dollars, sign in to GoldBean to create a practice portfolio.

A private company is owned by individuals or groups of people, who share its profits and losses. There are many limitations around buying into private companies. A public ('listed') company is owned by the people who own its shares. Buying shares in publicly-traded or “listed” company is a form of investing.

Currently, you need to be an "accredited investor" to invest in private companies. This law, designed to protect less-savvy investors, allows only people with $1 million in investable assets to invest in private companies.

You won't make or lose money until you sell a stock. The GoldBean® Index recommends whether you should buy, sell or hold onto a stock. Your portfolio might be down today, but as stock prices move, your portfolio might be up in a month. Patience is more than a virtue, it is a strategy.

GoldBean® assesses your risk profile - which is the measure the financial services industry uses to determine your investor type. The GoldBean® Index helps you make decisions about companies to protect you from buying or selling at the wrong time. Trust your instincts, act on them, and profit from them.

When you buy a stock, you invest in it. You exchange your money for partial ownership in the company in the form of stock. Owning a stock means just that - you own stock or shares in that company and are thus an official shareholder. Even if you buy just one share of Apple, you’re a shareholder in Apple. Selling a stock happens when you want to trade the stock back for cash or liquidate it. Selling a stock is when you actually make or lose money on the stock. If you sell it for more than you bought it for, you make money. If you sell it for less than you bought it for, you lose money.

Stock prices change everyday because of market forces like supply and demand. For example, if more people want to buy a stock rather than sell it, the price will go up. On the flip side, if more people want to sell a stock than buy it, there is greater supply than demand and the price of the stock would fall. There are many theories out there on why these price changes happen, and even people trying to predict when they will happen. We recommend a buy and hold strategy, aka evaluating and investing in companies over the long term, regardless of daily stock price movements.

Ahh, you had to ask us the hard stuff. In most investment accounts, you’ll have to pay what’s called a capital gains tax on any net profit you make when you sell a share. There are two types of capital gains tax. Short-term capital gains tax applies if you sell shares before you’ve held them for a year. It’s the same rate as your income tax rate (0 to 40%). Long-term capital gains tax applies if you sell shares after you’ve held them for a year, and ranges from 0 to 20%. On the other hand, if you sell a share that has decreased in value since you bought it, that’s called a capital loss. The general rule is you only have to pay taxes once you sell a share that has gone up in value.

You can think of risk in three ways: your willingness to take on risk, your ability to take on risk, and your need to take on risk. Willingness is like you “freak-out factor”. Are you going to be up all night worrying about the potential of loss? If you lose money, will you preoccupied with that loss and unable to focus on anything else? Willingness is your personal psychological disposition toward risk. Ability is a mix of your age and the stability of your income. Are you in your 20s with a stable income and a career path that will allow you to continue to earn more? You have the ability to take on more risk than say someone in their 60s who wants to start their own business. Finally, your need to take on risk refers to how much risk you need to take on in order to reach your goals for investing.

We’d love to hear your story and personal experiences with investing. As of right now, there isn’t a formal way to engage with other GoldBean® members, but we would love to be able to provide a forum for members to ask questions and share stories. If you’d be interested in sharing your experiences and connecting with other GoldBean® members, both on and offline, let us know here.

Not on an individual level. Your actions (what stocks you watchlist, what you buy and sell) can be seen on an aggregate level only. For example, other members of the community might know that a 28 year old Female living in New York City also invests in Technology stocks.

A risk profile is an assessment of your ability and willingness to take on risk. Basically, it’s all those questions you answered when you first signed up for GoldBean®, such as “What are your income and expenses?” and “What do you own and owe?” Your risk profile allows us to recommend a target allocation of stocks and funds that matches the level of risk you want to take on.

We take security very seriously. We use the same backend technology as major financial institutions, such as your own bank. We do not store your bank login/password or credit card information on our servers ever.

The Foundations of Investing

So, What’s a Stock?

Stocks represent shares of a company. Buying shares in a company makes you a part owner of that company. As a part owner or shareholder, you benefit when that company makes money. Ways a company makes money (or earnings) might be by releasing a new product or by increasing its sales. If the company is successful, you (the shareholder) will share in that success when the stock rises in price and when the company shares its profits with you through dividend payments.

The Foundations of Investing

What are funds?

Instead of investing in individual stocks (or bonds), funds are a collection of stocks or bonds that you invest in. They are generally less volatile than individual stocks and a good way to do well when the market is doing well.

What are funds?

There are different types of funds, but the most popular are index funds and ETFs. Index funds simply buy shares in many companies, aiming to track the overall performance of the stock market as closely as possible. The goal with Index Funds is not to “beat the market”, but to match it. Index funds are managed by experts so, they will have management fees to pay these experts.

What are funds?

ETFs or Exchange Traded Funds also try to match the performance of an index, but the funds are not managed like an index fund. They are basically set and run on their own, so usually have lower fees than an index fund. They've become pretty popular in the last five years since the market has been doing well, and now offer a huge range of choices.

The Foundations of Investing

What’s a bond?

That video game you used to play with your cousins. 007. Just kidding - we’re talking about the bonds you can invest in here.

Both corporations and governments issue bonds as a way of raising money. Bonds are kind of like loans. If you buy a bond, you’re essentially a lender to the company or government who issued the bond, and so, you’re able to collect interest. Bonds do something called “mature.” The “maturity date” of a bond is the date in which the company or government who issued the bond owes you the money that you invested (the principal) back, and interest payments stop. Bonds are generally understood to be less risky than stocks and can be used to offset the risk of stocks in a balanced portfolio.

The Foundations of Investing

Why is cash important?

You might not immediately think of cash when it comes to investing, but it does have a role. First, cash can be used to balance out the risk from stocks in your portfolio. Another role of cash is to have some funds in case an opportunity pops up. For example, in a downturn, you might be tempted to cut and run - liquidate your portfolio and get out of the market. But with experience and confidence, you might begin to realize that a downturn is actually a great time to go shopping for stocks because prices are low. Buy low, sell high and keep some cash dry.

The Basics of Balance

Ok, so what’s all this about balance?

You’ve probably heard it before. “A balanced portfolio”, “diversification.” It all means the same thing: Don’t put all your eggs in one basket. Or in this case, don’t put all your money in one stock. Please. Just don’t.

Let’s start with your portfolio. A portfolio is a collection of your investments. You might be invested in individual stocks, ETFs aka Exchange Traded Funds, or bonds. You might be invested in all three - woohoo! The sum of all those plus cash is your portfolio. Cool!

Back to Balance

Balance means allocating your money over a variety of assets (stocks, funds, bonds, even cash) that won’t be affected by similar outside pressures. The most common way people think about balancing a portfolio is to invest in both stocks and bonds. Why? So that you can get the benefits and growth of stocks, as well as the relative stability of bonds.

Different ways to balance

There are other ways to think about balancing and diversifying as well, such as investing outside the U.S. market, or investing in a range of industries. Don’t worry, if this is something you want to do, there are great low-fee ETFs that will do this work for you, and invest across a diverse range of countries or industries. Easy.

The important thing to remember about balancing your portfolio is that you take some time to understand your own tolerance for risk, and your goals for investing so that you are confident and clear when it comes time to make decisions about your portfolio.

3 Things To Know About Risk

1.

Risk + You

Risk, risk, risk. The term gets thrown around a lot. What does it mean and what should you know about it.

The first way to think about risk is your personal relationship to it (your sleep-well-at-night factor). How do you feel about the potential of losing money? This combined with your age (time to retirement) and some other financial fun facts about you (how much you’re saving, how much debt you have) helps inform your “risk profile.” Your risk profile helps us and other advisors suggest investment products that meet your goals and are right for your current financial situation.

2.

Risk + Stocks and Bonds

Risk is measured and understood differently for stocks and bonds. Generally, stocks are seen as more risky because they are more volatile, but they also have the potential of much greater return to you (the investor). Bonds tend to be seen as less risky because they pay the investor interest and the amount you’ll make off of them is usually fixed. Bonds come with their own set of risks though, such as the government or company who issued the bond not being able to pay you back (aka default).

Risk is a part of investing in both stocks and bonds, so it’s important to understand the different factors for each.

3.

Risk + Loss of Purchasing Power

If you ask our pal Warren Buffet, he says, "Risk is actually the loss of your purchasing power.” Or basically how much you can actually buy with your money, which is the whole point of having it, duh! One of the riskiest things you can do is keep your long-term money in cash. Many people do this, and avoid the market because they are afraid of, you guessed it, risk! But for your long-term money (anything you’re not going to touch in the next 5-10 years), it’s actually more risky to leave it in cash than invest it. Why? Because inflation. The real value of your cash decreases every year, meaning each year you’re able to buy less with the same amount of cash.

There are a ton of different ways to think about risk, and we’ve only outlined a few above. In order to gauge and manage risk, you’ve first gotta understand it!

How to find investments

It’s hard for everyone

Finding great investments before their value increases is the goal for every investor. But there’s no simple answer to how to do it... In fact, even if you had access to perfect information, you still might not pick good investments. Even professionals have a hard time. The Center For Applied Research at Tufts University found that of 2,046 mutual funds they tracked from 1976 and 2006, only 1% of those funds beat the market after fees. So even with all the information in the world, even professionals have a hard time beating the market.

What should you do?

Get started. Talk to friends. Use your network. Learn what the words mean. Look at the world differently -try to think of yourself not as a ‘consumer’ of stuff, but as a part of a wider economy where your spend with a company goes into their shareholders pockets. Start thinking about the companies that are already part of your life, and that you already spend money with. The most important thing is that you don’t let your fear of not knowing what to do stop you from getting started.

What should you NOT do?

If something seems too good to be true, it generally is. Don’t trust the ‘advice’ of anyone unless you understand where they are coming from, and what they have to gain from their advice. And once you’re in the market, don’t obsessively check the value of your portfolio. Public equities (and the funds that they are in) go up and down every day. If you are obsessing over what you currently have, you won’t be open to see new opportunities as they arise.

3 Steps to Building Confidence

3 Steps to Building Confidence

Building confidence takes time, patience, and practice. Here are three strategies that can help you start building confidence now.

1.

Ditch Your Fear

F.E.A.R. False. Evidence. Appearing. Real. Fear is not your friend when it comes to thinking about your money or investing. You might think you don’t know enough, or worry that you’ll make mistakes. Here’s the truth: no one has access to perfect information when it comes to investing. Even the professionals struggle to beat the market. There’s a ton of research that shows the negative effects of fear when it comes to making decisions about your money. Instead of focusing on everything you don’t know, focus instead on what you DO know. Bet on your strengths!

2.

Realize That Everyone Makes Mistakes

Investing is a journey, and success doesn’t come overnight. Listen, even Warren Buffett makes mistakes. Yeah, best investor in the world — he gets it wrong sometimes. This is where a diversified and balanced portfolio comes into play. Even if you make a mistake (buy or sell at a less than ideal time, miss an opportunity) the point of being diversified is to minimize your exposure to risk, potential loss, and your own mistakes. If you’re able to accept the fact that you’ll make some mistakes along the way, you’ll be able to focus on your goals and strategies for your money rather than your worries.

3.

Practice, Practice, Practice.

Best way to learn something? By actually doing it. You can read all the books and blogs, listen to all the podcasts, google all the investing tips, but nothing beats the real thing. Or, the fake-real thing, like having a practice portfolio, for example. Why? Because once you actually start investing, you’ll start experiencing some of the things you’ve been learning and hearing about. You’ll start to understand the jargon and be able to contextualize it because you’ll actually be doing it. What’s a trade? Oh yeah, I know that! It’s buying or selling a stock. How? Because I just bought some Apple (AAPL) stock in my practice portfolio today. Boom!

Building confidence when it comes to investing doesn’t come overnight. You won’t know everything at first, and you’ll make some mistakes, but as time passes, you’ll start to realize your mistakes aren’t going to ruin your chance at success. The first thing to do: start!